They don't know if you already discussed the potential issues and the options for repair, TTS, etc. The GSM may have been wondering why you're doing it up front, potentially for free. Second, running diagnostics and then recommending the best solution is a paid service we provide. Now they want data recovery and their computer repaired for free. You'd then have someone who brought their device in because it was slow but still booting, to suddenly it no longer boots after an Agent worked on it in front of them, without a data services agreement and service order signed.
One would be if you ran hardware diagnostics in front of the client and just had the bad luck that a failing HDD finally failed completely.
Without knowing all the details of what exactly OP's manager said, there are a couple things that come to mind for the GSM's stance on MRI being used at the counter: I mostly agree with this, especially about proper expectations and client data being asked about early.